Effect of Student Loans to an Individual Life and to the National Economy; Good or Bad
Without beating around the bush, let’s directly have a look at some of the statistics concerning student loans. The current value of student loans in the US has reached up to 1.3 trillion, with over 44 million individuals under the debt. As many as 7 million individuals are last year’s defaulters. Another astonishing figure is the average balance, which is more than $37,000 for an average student in the Class of 2016. The figures surely depict a sorry state; however, some economists believe that student loans can actually prove to be good for the economy as it can increase tax revenues for the government. Let’s have a look at some of the good and the bad associated with student loans and analyze their impact on the borrowers and the economy.
The best part about the student loan, undoubtedly, is that it facilitates the students. The students, who cannot afford quality education, can take help of such loans and move one step closer to achieving their goals. There are various companies offering such loans on easy terms and feasible rates; hence, acquiring student loans isn’t really a tough phase but repayment of such loans may become one; more on that later in the cons section.
Positive Effects on the Economy
As discussed above, student loans can have certain positive effects on the economy. Since it allows the students to complete the education and ultimately land a job that enables them to use their skills and work to full of their abilities to earn well and hence, contribute to the economy of the country. Moreover, with student loans, the literacy rates move upward and the unemployment rate goes down which is a further indication of the prosperity of an economy.
Bad Credit of Borrowers
A major disadvantage associated with the student loan is its effect on the credit of the borrower. If in case, the borrower hasn’t been able to repay the loan on time, it affects their credit score which makes it tough for them to acquire loans i.e. home loan, auto loan etc. in later stages of life.
Lack of Opportunities
Although there is no direct connection, but student loans is one reason for the lack of opportunities for the borrowers. For the longest time in their financial careers, they use a major chunk of their income to repay the loans; hence, find it difficult to utilize any major opportunity that might come their way. It can be difficult for them if they are thinking of starting a small or mid-scale business entity, as they have the responsibility of repaying the student loan to avoid getting a bad credit on their name.
To sum it up, student loans makes for an easy way for the students to get a quality education even if they cannot afford it. However, it is the responsibility of the governments to look into the matters concerning the drawbacks associated with the student loans to provide a relief to the students who have acquired such loans.